Russia Threatens Tactical War!

Just moments ago, Russia issued a military threat against the United States and Eastern Europe if the defensive missile shield is deployed in Eastern Europe. Wow! It wasn't even a veiled threat. They said they would strike with a tactical military response! No hedging, no veiled or implied military strike. That's the first threat I've heard of a possible World War III! It will be interesting to see the impact on financial markets!

The Trap of Trying to Trade Fundamentals

The reason why prices change is ultimately irrelevant, since only price really matters. The reason for that price doesn't. Over the weekend, I was reading the book, "The Disciplined Trader" by Mark Douglas. He says that one psychological weakness of most traders -- even floor traders -- is that they tend to look for a reason why that market did what it did, as if that predicts future price action. Does it really matter that corn prices fell because of ports reopening, versus prices that dropped because farm yields rose, versus prices that drop because the price of crude oil went down, versus prices that fell because the Dollar gained strength? Who cares what the reasons are? "Reasons for" are ultimately irrelevant. All that really matters is that the price fell.

Some one else will always have better fundamentals-related information, either because they have more information (ie., an additional source of information that I don't have), or because they have more current (up-to-the-moment) information. Even then, this information doesn't tell them what to do with that information. How they choose to trade that information matters much more.

The fact that I attributed the reason to something suggests that I am falling into that same psychological trap as most other traders. It's not enough to simply observe that prices fell. Like the rest of the market sheep, I feel better knowing why it fell. I deceive myself into thinking that somehow knowing the reasons after-the-fact somehow gives me an edge in future trading. It doesn't.

I check various web sites for fundamentals-related information before the futures markets open for the day session each day, but I have to admit that this information has never provided me with information that gave me an edge -- or profits -- in trading. Technical analysis, on the other hand, does provide me with an edge every day. The chart reveals to me real-time what market sentiment is, and even more importantly, what the market is doing. Knowing why corn prices fell overnight tells me nothing about price activity tomorrow. This is why knowing fundamentals-related information can be a psychological trap -- and usually is for most traders, myself included.

Soybean Rebound

Despite an expected further sinking in soybean prices this morning, prices have rebounded instead. In the futures markets, one must always expect the unexpected. That's why I trust my charts. They won't mislead me.

Unfortunately, when I study the fundamentals, they often do. I have found that there is always someone else who has more information, or has that information sooner than I do. However, as soon as traders start to act on the information, I see that activity manifested on my chart within moments. Then, I will take action. It is usually several minutes later than I learn the fundamentals-related reasons for what occurred.

Bouyant Rebound Following Dismal Jobs News

Beyond all predictions of the experts and professionals, stock market indexes have rebounded to positive territory following the abysmal jobs report earlier this morning. What a turnaround!

Trading on the Fundamentals

This is a perfect example of an instance in which market forces have done precisely the opposite of what would have been expected, defying all reason. This is why I don't trade on fundamentals-related news events. I like to be aware of the fundamentals, especially the timing of news events. However, I trade only on technical analysis. The charts don't lie or mislead! I use fundamentals news only to confirm what the charts are telling me.